Kakileti Satyanarayana, Mandapeta V. The Income Tax Officer, Ward-1, Amalapuram

ITA 673/VIZ/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 2025 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 11 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-11-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2004-2005
• Appeal Filed On: 13-12-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D K SONAWAL
• Keywords: Search and seizure; Documents seized; Capital Gains
• Section: 143(3); 54F; 153; 153C; 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM SMC BENCH, VISAKHAPATNAM (T HROUGH WEB - BASED VIDEO CONFERENCING PLATFORM) BEFORE SHRI V. DURGA RAO , HONBLE JUDICIAL MEMBER I . T . A . NO. 673 / VIZ /2019 (ASST. YEAR : 20 04 - 05 ) KAKILETI SATYANARAYANA, D.NO. 4 - 7 - 7, TOWN POLICE STATION, MADAPETA, EAST GODAVARI DISTRICT. VS. IT O , WARD - 1, AMALAPURAM . PAN NO. AJVPK 1053 B (APP ELLANT ) (RESPONDENT) ASSESSEE BY : SHRI G.V.N. HARI , ADVOCATE . DEPARTMENT BY : SHRI D.K. SONAWAL , CIT - DR DATE OF HEARING : 25 / 11 /2020 . DATE OF PRONOUNCEMENT : 26 / 1 1 /20 20 . O R D E R THI S APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) , RAJAMAHENDRAVARAM , DATED 05 /0 8 /201 9 FOR THE ASSESSMENT YEAR 20 04 - 05 . 2. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE HAS FILED HIS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION BY ADMITTING TOTAL INCOME OF RS. 1,01,200/ - AND AGRICULTURAL INCOME OF RS.60,000/ - . A SEARCH AND SEIZURE WAS CONDUCTED IN THE CASE OF VAIBHAV KANKATALA GROUP ON 09/01/2009 AND CERTAIN INCRIMINATING DOCUMENTS RELATING TO THE ASSESSEE WERE SEIZED . THE CASE HAS 2 ITA NO. 628 / VIZ /2018 ( CHENNU BHASKARA RAO ) BEEN CENTRALIZED TO DCIT, CENTRAL CIRCLE - 1, VISAKHAPATNAM. A NOTICE U/SEC. 153C WAS ISSUED TO THE ASSESSEE . IN RESPONSE TO THE NOTICE, ASSESSEE HAS SUBMITTED THAT RETURN HAS ALREADY BEEN FILED FOR THE A.Y. 2004 - 05. IN THE ASSESSMENT ORDER, THE AO HAS NOTED THAT AS SEEN FRO M THE BALANCE SHEET THE ASSESSEE HAD SOLD 2052 SHARES TO DIVIS LAB WHICH WERE ACQUIRED IN THE YEAR 1999 AT RS.30 PER SHARE . SIMILARLY THE ASSESSEE SOLD 279 SHARE S OF GE SHIPPING AND 300 SHARES OF ZEE TELE FILM DURING THE FINANCIAL YEAR AS EVIDENT FROM THE BALANCE SHEET . IT IS FURTHER OBSERVED THAT THESE TWO SCRIPS WERE ACQUIRED ON 28/03/2000 AND 22/05/200 RESPECTIVELY . THE ASSESSEE HAS NOT FILED INFORMATION RELATING TO DATE OF SALE OF TWO SCRIPS I.E. GE SHIPPING & ZEE TELE FI LMS. HENCE, IT IS PRESUMED THAT THESE TWO SC R IPS ALSO SOLD ON 05/03/2004 ITSELF . BASED ON THE INFORMATION AS SHOWN ABOVE , THE LONG TERM CAPITAL GAINS ON SALE OF SHARE S IS WORKED OUT TO RS.34,08,528/ - . THE ASSESSEES CLAIM TO HAVE MADE INVESTMENT OF THE LONG TERM CAPITAL GAINS IN PURCHASE OF VACANT SITE FOR WHICH AN AMOUNT OF RS. 35,88,000/ - WAS PAID TILL THE DATE OF F ILING OF RETURN AND CLAIMED DEDUCTION OF SECTION 54F OF THE ACT. AS SUCH THE ENTIRE AMOUNT OF CAPITAL G A I NS WAS UTILIZED FOR THE PURCHASE OF A SITE ITSELF AND HE DID NOT HAVE ANY AMOUNT FOR CONSTRUCTION PURPOSE OUT OF THE CAPITAL GAINS . IN THE RETURN OF INCOME THE 3 ITA NO. 628 / VIZ /2018 ( CHENNU BHASKARA RAO ) ASSESSEE CLAIMED EXEMPTION U/SEC. 54 F OF THE ACT. AS PER THE PROVISIONS OF SECTI O N 54F , THE ASSESSEE IS SUPPOSED TO ACQUIRE A RESIDENTIAL HOUSE WITHIN A PERIOD OF ONE YEAR BEFORE OR TWO YEARS AFTER THE DATE ON WHICH THE TRANSFER TOOK PLACE PURCHASE D , OR HAS WITHIN A PERIOD OF THREE YEARS AFTER THAT DATE CONSTRUCTED A RESIDENTIAL HOUSE, THE CAPITAL GAIN AROSE OUT OF THE TRANSACTION WILL BE TAXED ACCORDINGLY. IT IS SEEN FROM THE ABOVE, THE ASSESSEE SOLD SHARES AND INVESTED THE SAME IN THE PURCHASE OF A VACANT SITE IN VISAKHAPATNAM BUT NOT ANY RESIDENTIAL PROPERTY. FURTHER, THE ENQUIRIES CAUSED REVEALED THAT THE ASSESSEE HAD NOT CONSTRUCTED A RESIDENTIAL HOUSE IN THE PROPERTY EXCEPT A SMALL SHED WITH MEASUREMENTS OF 8FT X 8FT WHICH CANNOT BE CALLED AS RESIDENTIAL PROPERTY. ACCORDINGLY, ASSESSMENT WAS COMPLETED U/S EC. 143(3) R.W.S. 153C OF THE ACT , DATED 28/12/2011 AND EXEMPTION CLAIMED BY THE ASSESSEE U/SEC. 54F WAS DISALLOWED AND THE SAME IS BROUGHT TO TAX. 3 . ON APPEAL, LD. CIT(A) CONFIRMED THE ORDER OF THE AO. 4 . ON BEING AGGRIEVED , ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THIS TRIBUNAL. 5. LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THERE IS NO SEIZED MATERIAL IN THE CASE OF THE ASSESSEE THEREFORE WITHOUT SEIZED MATERIAL ADDITION CANNOT BE MADE IN THE HANDS OF THE 4 ITA NO. 628 / VIZ /2018 ( CHENNU BHASKARA RAO ) ASSESSEE AND SUBMITTED THAT CLAIM DISALLOWED BY THE AO IS INVALID AND THE ASSESSMENT SHOULD BE QUASHED. FURTHER , HE RELIED ON THE DECISION OF THE COORDINATE BENCH OF THE TRIBUNAL IN IT(SS) NO. 8 TO 10/VIZ/2018 IN THE CASE OF SRI PATTAPAGALU VENKATA RAO VS. ACIT DATED 17/07/2019 . 6 . ON THE OTHER HAND, LD.DR STRONGLY SUPPORTED THE ORDER S OF THE AUTHORITIES BELOW. 7 . WE HAVE HEARD BOTH THE SIDES, PERUSED THE MATERIAL AVAILABLE ON RECORD AND ORDERS OF THE AUTHORITIES BELOW . 8 . IN THIS CASE, THE AO HAS ISSUED NOTICE U/SEC. 153 C ON THE GROUND THAT THERE WAS SOME INCREMENTING MATERIAL FOUND DURING THE COURSE OF SEARCH CONDUCTED IN THE CASE OF VAIBHAV KANKATALA GROUP . IN THE ASSESSMENT ORDER, THE AO HAS NOTED THAT FROM THE BALANCE SHEET OF THE ASSESSEE THERE ARE CERTAIN PURCHASES AND SALES OF SHARES AND EARNED CAPITAL GAINS. THERE IS NO REFERENCE TO SEIZED MATERIAL AT ALL AND THE ADDITION MADE BY THE AO IN RESPECT OF CLAIM OF 54F RELA T ING TO PURCHASE AND SALE OF SHARES. THE AO HAS DISALLOWED THE CLAIM OF THE ASSESSEE U/SEC. 54F NOT BASED ON ANY SEIZED MATERIAL . THERE IS NO PROXIMITY BETWEEN THE NOTICE ISSUED BY THE AO U/SEC. 153C AND DISA LL OWANCE OF CLAIM MADE BY THE ASSESSEE U/SEC. 54F OF THE ACT . AS PER THE DECISION OF THE COORDINATE BENCH OF THE TRIBUNAL IN THE CA S E OF VAIBHAV KANKATALA 5 ITA NO. 628 / VIZ /2018 ( CHENNU BHASKARA RAO ) GROUP (SUPRA) NO ADDITION U/SEC. 153C CAN BE MADE WITHOUT SEIZED MATERIAL . WE FURTHER FIND THAT THE ITAT, VISAKHAPATNAM BENCH BY FOLLOWING THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF SINHGAD TECHNICAL EDUCATIONAL SOCIE TY [(2017) 397 ITR 344 (SC)] HAS HELD THAT UNLESS THERE IS AN INCRIMINATING MATERIAL FOUND BELONGING TO THE ASSESSEE, THE ACTION U/SEC. 153C OF THE ACT IS NOT PERMISSIBLE . FOR THE SAKE OF CONVENIENCE, THE RELEVANT PORTION OF THE ORDER IS EXTRACTED AS UNDER : - 5.2. WE HAVE CAREFULLY CONSIDERED THE SUBMISSION AND NOW IT IS SETTLED ISSUE THAT FOR INITIATING THE PROCEEDINGS U/S 153C OF THE ACT, IT IS INCUMBENT UPON THE A.O. TO HAVE THE INCRIMINATING MATERIAL EVIDENCING THE UNDISCLOSED INCOME. IN THE ASSESS EES CASE NO SUCH EVIDENCE WAS FOUND DURING THE COURSE OF SEARCH IN THE CASE OF G.S.L.EDUCATIONAL SOCIETY. AS PER THE PROVISIONS OF SECTION 153C OF THE ACT, IT IS MANDATORY TO HAVE THE SATISFACTION OF THE A.O. THAT MONEY, BULLION, JEWELLERY OR OTHER VALUAB LE ARTICLE OR THING OR ANY BOOKS OF ACCOUNTS, DOCUMENTS SEIZED OR REQUISITIONED PERTAINS TO OR RELATES TO THE ASSESSEE, WHICH MEANS THAT UNLESS THERE IS AN INCRIMINATING MATERIAL BELONGING TO THE ASSESSEE IS FOUND, THE ACTION U/S 153C OF THE ACT IS NOT PER MISSIBLE. IN THE ASSESSEES CASE THERE WAS NO INCRIMINATING MATERIAL FOUND AND SEIZED FROM THE PREMISES OF THE SEARCHED PERSON. AS DISCUSSED EARLIER THE MATERIAL FOUND DURING THE COURSE OF SEARCH WAS RELATED TO THE A.Y.2014 - 15. THEREFORE, WE HOLD THAT THE NOTICES ISSUED U/S 153C OF THE ACT, FOR THE IMPUGNED ASSESSMENT YEARS ARE UNSUSTAINABLE. THIS VIEW IS UPHELD BY THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. SINHAGAD TECHNICAL EDUCATION SOCIETY (2017) 84 TAXMANN.COM 290 (SC). THIS TRIBUNAL ALSO CONSIDERED THE IDENTICAL ISSUE IN THE CASE OF M/S. SRI BALAJI CONSTRUCTIONS, KAKINADA IN ITA NO.387/VIZAG/2014 DATED 10/01/2018 AND DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. RESPECTFULLY FOLLOWING THE DECISION OF HONBLE APEX COURT AND THE VIEW TAK EN BY THIS TRIBUNAL WE HOLD THAT NOTICE ISSUED U/S 153C WITHOUT HAVING INCRIMINATING MATERIAL CANNOT SURVIVE, ACCORDINGLY QUASHED. 6 ITA NO. 628 / VIZ /2018 ( CHENNU BHASKARA RAO ) 9 . BY RESPECTFULLY FOL LO W I NG THE DECISION OF THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF VAIBHAV KANKATALA GROUP (SUPRA) WE HOLD THAT NOTICE ISSUED U/SEC. 153C WITHOUT HAVING ANY INCRIMI NA TI NG MATERIAL CANNOT SURVIVE. ACCORDINGLY , WE QUASH THE SAME AND ALLOW THE APPEAL OF THE ASSESSEE. 10 . IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON TH IS 2 6 T H DAY OF NOV. , 2020 . S D / - (V. DURGA RAO) JUDICIAL MEMBER DATED : 2 6 T H NOVEMBER , 20 20 . VR/ - COPY TO: 1. THE ASSESSEE - KAKILETI SATYANARAYANA, D.NO. 4 - 7 - 7, TOWN POLICE STATION, MADAPETA, EAST GODAVARI DISTRICT. 2. THE REVENUE ITO, WARD - 1, AMALAPURAM. 3. THE PR. CIT , RAJAMAHENDRAVARAM. 4. THE CIT(A) , RAJAMAHENDRAVARAM 5. THE D.R . , VISAKHAPATNAM. 6. GUARD FILE. BY ORDER (VUKKEM RAMBABU) SR. PRIVATE SECRETARY, ITAT, VISAKHAPATNAM.